Apr-Oct fiscal deficit at 84% of BE

The finance ministry's optimism about restricting the Centre's fiscal deficit to 4.8 per cent of gross domestic product (GDP) in 2013-14 notwithstanding, falling tax revenues and rising Plan expenditure have widened the deficit for the first seven months of this financial year to 84.4 per cent of the Budget estimate (BE).

Data released by the Controller General of Accounts on Friday showed the Centre's fiscal deficit stood at Rs 4.57 lakh crore for the April-October period, against the Budget Estimate of Rs 5.43 lakh crore for the entire financial year.

For April-October 2012, the Centre's fiscal deficit stood at 71.6 per cent of BE. For 2012-13, BE of the deficit was 5.1 per cent of GDP. Due to a sharp 17 per cent cut in Plan expenditure, the government was able to restrict its fiscal deficit to 4.9 per cent of GDP last financial year.

For April-October this year, Plan expenditure was the primary factor behind the wide deficit. During this period, Plan expenditure stood at Rs 2.68 lakh crore, 48.3 per cent of the BE of Rs 5.55 lakh crore for 2013-14. For the year-ago period, Plan expenditure had accounted for 43.2 per cent of the 2012-13 BE.

Analysts said this time, too, the government would have to cut Plan expenditure significantly, though the coming elections and the slowing economy might act as a hurdle to this. "The fiscal deficit will widen to 5.2 per cent of GDP, unless the government cuts Plan expenditure heavily this time as well," said India Ratings Chief Economist Devendra Pant. However, an aggressive cut in Plan expenditure would have an adverse impact on the already slowing growth, he added.

Slow growth in the economy has led to a fall in tax revenues. The government mopped up Rs 3.56 lakh crore through taxes in April-October 2013, 40.3 per cent of the BE of Rs 8.84 lakh crore. For the year-ago period, collections had accounted for 43.6 per cent of the 2012-13 BE. Last financial year, tax collections fell short of BE by about Rs 30,000 crore.

Disinvestment, too, hasn't provided much to the government; it garnered only Rs 1,577 crore under this head, largely due to meeting the Securities and Exchange Board of India's norm of at least 10 per cent public float.

This financial year, the Centre had aimed to mop up Rs 40,000 crore through disinvestment and Rs 18,000 crore by selling stakes of SUUTI in non-government companies such as L&T, ITC and Axis Bank.

The government has lined up six companies for disinvestment, including Indian Oil Corporation, Power Grid Corporation, Hindustan Aeronautics, Coal India Ltd and Engineers India Ltd. However, officials admit meeting the disinvestment target of Rs 40,000 crore would be difficult.

The government has also planned to rescind a Cabinet decision to close Specified Undertaking of UTI (SUUTI) to realise Rs 18,000 crore through selling equity in non-government companies. It is also planning exchange-traded funds of public sector undertakings.

Overall, non-debt capital receipts, under which disinvestment proceeds fall, provided the government Rs 8,082 crore during April-October this year, 12.2 per cent of the BE of Rs 66,468 crore. For the year-ago period, the government had garnered 17.4 per cent of the 2012-13 BE through this mode.

In April-October, the Centre collected non-tax revenue of Rs 99,515 crore, 57.8 per cent of BE, against just 42.8 per cent of BE in the year-ago period.

The Centre is planning to ask public sector enterprises to give it dividend of about Rs 30,000 crore, as estimated in the Budget. For this, central government will meet the heads of public sector undertakings in January. Besides, Rs 43,996 crore is estimated to come from public sector banks and the transfer of surplus money by the Reserve Bank of India.

For the April-October 2013 period, the Centre's revenue deficit, or the gap between current expenditure and current receipts, stood at Rs 3.5 lakh crore, 92.9 per cent of the BE of Rs 3.79 lakh crore. For the year-ago period, it stood at 81.4 per cent of BE.